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U.S. Service Sector Expanded in August at Fastest Pace in Two Years -- IHS Markit

The U.S. service sector in August saw a sharp increase in activity, as firms reported an accelerated pace of new orders received and hired new workers at the quickest rate in two years, according to a report Wednesday.

Economists surveyed by The Wall Street Journal expected an August reading of 57.

The report said new business expanded at the strongest rate since July 2015 and business confidence strengthened amid rising client demand. The August results also mark the 18th consecutive month of growth for the services activity index.

The purchasing managers' composite index, known as the Composite PMI, rose to 55.3 from 54.6 in July. That index uses surveys from both the services and manufacturing surveys.

"The strong survey data add to the expectation that the economy was picking up further momentum before Hurricane Harvey hit, the impact of which is still a big unknown," said Chris Williamson, chief business economist at IHS Markit. He added that early data pointed third quarter gross domestic product rising at an annualized rate of 3.5%, but that figure may now come in slightly below 3%.

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Last week, the U.S. manufacturing purchasing managers' index slid to 52.8 in August from its final reading of 53.3 in July. The report, which also didn't include any effects from Harvey, noted that while workforce numbers grew at the fastest pace in six months, production increases slowed.